US: Treasury International Capital

Wed Feb 18 15:00:00 CST 2015

Actual Previous Revised
Foreign Demand for Long-Term U.S. Securities $35.4B $33.5B $33.5B

Foreign accounts were actually net sellers of US long-term securities in December, by $5.8 billion, but sizable selling of foreign long-term securities by US accounts, at $41.2 billion, made for respectable monthly inflow of $35.4 billion. Foreign accounts were big sellers of US Treasuries in the month, at a net $22.2 billion, but were net buyers of US equities by $9.4 billion. US accounts were big sellers of foreign bonds, at $37.9 billion, and also sold equities by a net $3.3 billion.

Looking at holders of US Treasuries, China is still at the top, at $1.24 trillion vs Japan's $1.23 trillion. Belgium remains in 3rd, steady at $335 billion. Russia continues to slip, now in 14th at $86.0 billion which is well down from November's $108.1 billion.

These Treasury data track the flows of financial instruments into and out of the United States. Instruments tracked include Treasury securities, agency securities, corporate bonds, and corporate equities.

TIC data have been issued for the past 30 years, but only recently, due to an enormous rise in foreign participation in our markets, have they grabbed the attention of the international financial markets. Although methodologically limited, TIC offers a measure of foreign demand for our debt and assets. Bonds and the dollar are most sensitive to the data, therefore bond and foreign exchange markets are more likely to react to this report than the equity market. Strong inflows (demand for U.S. securities) are needed to keep downward pressure on interest rates. Strong inflows also underpin the value of the dollar since foreigners must purchase dollars in order to buy our securities. A strong dollar helps to maintain stability in all U.S. financial markets. Since foreign ownership of U.S. equities is comparatively small, the equity market is less concerned about this report.